Review: Puma AIM Inheritance Tax Service
Archived article: please remember tax and investment rules and circumstances can change over time. This article reflects our views at the time of publication.
This award-winning AIM IHT service is managed by Puma Investments, part of Shore Capital, one of the largest AIM market makers. It is a discretionary investment portfolio of around 22 companies which should qualify for Business Property Relief.
- Focused portfolio of 22 AIM-listed companies
- Often family-owned or founder-controlled firms
- Experienced manager investing in small and medium sized companies for 19 years
- Minimum investment £20,000
The Puma AIM IHT service is managed by Puma Investments, part of Shore Capital – itself an AIM-listed business and market maker to many AIM listed companies.
The investment director is Justin Waine, who has been investing in small and medium-sized companies for 19 years. Mr Waine started his career as a small company broker at Cazenove, before joining Polar Capital to launch a European long/short hedge fund focused on small and medium-sized companies. He joined Puma in June 2014 and launched the IHT portfolio in July 2014.
Mr Waine was attracted to Puma’s long-term investment style. He had analysed AIM extensively and realised the market had changed enormously. In his view the market no longer included just speculative high-risk businesses but also plenty of long-term mature ones, which are the focus of this portfolio.
Watch an exclusive video interview with manager Justin Waine:
The portfolio targets mature AIM businesses screened across three key metrics: Quality, Growth and Value. Capital preservation is also a priority.
Mr Waine focuses on two kinds of companies: firstly, family or founder-owned, as they often are on AIM for Business Property Relief reasons; and secondly companies controlled by a successful entrepreneur. Long-term buy and build holdings are also considered, provided they’re not aggressively acquisitive.
Whatever the company type, Mr Waine seeks businesses with potential returns above the cost of capital. Discounted cash flow analysis is done for every company using Puma’s own internal metrics and analysis and a fair value price target is set.
The portfolio seeks companies with decent margins, sales and profit growth and a sensible balance sheet. Having a cheap share price isn’t the most important factor for Puma. A strong balance sheet is more important. The firm looks at companies with a market cap of at least £50 million.
Annual performance (to 31 December each year, %)
Below is the average annual performance of the portfolio for each calendar year since launch.
|Puma AIM IHT Portfolio||—||4.72%*||30.90%||4.98%||15.23%||-20.11%|
|FTSE AIM All-Share Index (AXX)||20.29%||-17.48%||5.23%||14.29%||24.30%||-18.20%|
Source: Puma Investments, December 2018. Past performance is not a guide to the future. All performance data is quoted net of management and dealing fees, and applies to the Investment Director’s portfolio. Small variations in performance may apply as each individual investor has their own discrete portfolio of assets.
Investors will each hold a portfolio of around 20-25 shares. This is a relatively concentrated portfolio when compared with its peers. Each portfolio aims to closely mirror the investment director’s own portfolio.
The portfolio seeks to be fully invested in AIM shares, with only a small cash position (approximately 3-5%). The average position size is 3% to 6%, with no position greater than 10% of the portfolio.
The portfolio avoids early-stage companies such as loss-making miners, biotechnology companies and high-growth concept stocks, as well as small companies with a market cap under £50m.
Currently, the average market capitalisation of companies in the portfolio is £316 million (April 2019). Companies are typically bought with a three to five-year time horizon.
What kind of companies are in the portfolio?
H&T Group is an example of a portfolio company that ticks all the right boxes, in Mr Waine’s view. It is the UK's leading pawnbroker, with good cash flow. It was founded in 1897 and has survived despite tough market conditions in recent years. Its main competitor was Albemarle & Bond until it folded. H&T operates in a niche, with a strong market position. It is cash generative and has a low valuation based on Puma’s internal valuation. The company listed on AIM in 2006.
Scapa Group was founded in 1927 and is a global supplier and manufacturer of adhesive-based products and bonding solutions for the Healthcare and Industrial markets. In particular, it makes adhesive tapes, where the global market is growing approximately 5% a year. Adhesive tapes have healthcare applications in wound care, in fixing medical devices or for drug delivery (eg patches). Scapa has production sites in Asia, Europe and the US.
The stock has historically been the largest holding in the portfolio, at close to 10%. Recently the position was reduced to re-balance the portfolio.
As is to be expected, not all investments work out. A recent example is Patisserie Holdings plc.
Patisserie Holdings plc was
formally placed into administration in January 2019 following the
discovery of extensive fraudulent accounting irregularities back in
October 2018. The shares have been marked down to zero with no return
expected for shareholders.
Risks – important
This, like all investments available through Wealth Club, is only for experienced investors happy to make their own investment decisions without advice.
AIM IHT portfolios are high-risk so should only form part of a balanced portfolio and you should not invest money you cannot afford to lose. Before you invest, please carefully read the Risks and Commitments and the offer documents to ensure you fully understand the risks.
AIM stocks can be hard to sell, particularly at the smaller end of the market, and can be illiquid. AIM shares can be very volatile especially if the market falls sharply. The difference between the buying and selling price of AIM-listed shares is often wider than the spread for shares listed on the main market.
rules can change and benefits depend on circumstances. Eligibility for BPR is
assessed at the date of death and will depend on the companies in the portfolio
remaining qualifying. Broadly speaking,
you will need to have held a BPR qualifying stock for at least two years and
still hold it on death to qualify.
One further risk is that this is a more concentrated portfolio than other IHT portfolios with around 20-25 stocks, placing more importance on the stock-picking abilities of the manager. The portfolio centres on Justin Waine so there is some key man risk.
Fees and charges
An overall summary of the charges is shown below.
|Full initial charge||4%|
|Wealth Club initial saving||3%|
|Net initial charge through Wealth Club||1%|
|Annual management charge||1.25% plus VAT|
See example of the total charges over 5 years
Please see the provider’s documents for details. If you require a detailed breakdown or a personalised illustration, please contact us.
The Puma AIM Inheritance Tax Service has four years under its belt and performance has been encouraging, although of course there are no guarantees this will continue in future. The service targets mature AIM businesses screened across three key metrics: Quality, Growth and Value. Investment director Justin Waine is very experienced and knows what he is looking for in a company. There is some crossover with other AIM ISA portfolios as you might expect, but some different holdings too, which could provide diversification.
The Chancellor has requested a review of a range of aspects of IHT to simplify the tax system. The review timescales, its scope and impact are unknown. Currently, investments qualifying for Business Property Relief should be free from IHT after two years. Tax rules can and do change and benefits depend on circumstances.
Wealth Club aims to make it easier for experienced investors to find information on – and apply for – tax-efficient investments. You should base your investment decision on the provider's documents and ensure you have read and fully understand them before investing. This review is a marketing communication. It is not advice or a personal or research recommendation to buy the investment mentioned. It does not satisfy legal requirements promoting investment research independence and is thus not subject to prohibitions on dealing ahead of its dissemination.
Puma AIM Inheritance Tax Service
Visit the offer page for documents & how to applyGo to offer page